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Jobs Report: U.S. Economy Added 203K Jobs In November, Unemployment Down To 7%

Investors were waiting with bated breath for the November jobs report, anxious to see what the new numbers would indicate about Federal Reserve tapering.

Employers added 203,000 jobs in November, above the 180,000 economists expected. The unemployment rate, which is drawn from a different survey of households, was down to 7% from 7.3% in October. The labor force participation rate was up slightly to 63% from 62.8%.

Following the news the S&P 500 added about 18 points to 1,800 in pre-market trading. The Dow added about 143 points to 15,960.

“On the broad brush it is obviously a good number,” said Steve Blitz, chief economist at ITG Investment Research. Blitz pointed out, however, that private sector payroll and average hourly earnings are up about 2% year-over-year. He calls it “the 2% economy.” So when you dig into the numbers there are more questions.

In a note on the results, Jim Baird, chief investment officer for Plante Moran Financial Advisors, points out that although the unemployment rate has steadily dropped since the beginning of the year the “decline hasn’t been solely driven by the creation of high-paying full-time jobs.”

However, this is the second month in a row of better-than-expected jobs reports. Baird says this “raises the odds that the Fed could commence the tapering process for their bond purchase program in the near-term” meaning the positive economic news may not be good for investors in the short term.

Similarly, High Frequency Economics’ chief U.S. economist, Jim O’Sullivan, wrote,”The data are certainly strong enough, if sustained for the Fed to start winding down the QE program.” He, however, echoes the broader sentiment that tapering won’t start until January or March, since the December 17 Fed meeting is just around the corner.

The health care, transportation/warehousing and manufacturing industries all added significantly to the jobs number in November. The largest gains were in transportation and warehousing, which rose by 31,000 with jobs added for couriers, truck transportation and warehousing storage. Blitz cautions against putting too much weight in these increases because they may be largely holiday related and temporary. While the Bureau of Labor Statistics does make seasonal adjustments Blitz is not convinced it has caught up to the growth of online shopping. “Every year more and more stuff is purchased online. So the Amazons, the other online guys  and the people who deliver packages need to hire more people than they did last year to do the job.”

Health care employment was not far behind with 28,000 jobs added. Home health care services was the biggest gainer in the sector by far with 12,000 jobs added. Manufacturing added 27,00 jobs with major additions in food and motor vehicles. Gains were also seen in retail trade, hospitality and construction. The federal government employment, however, declined by 7,000. Over the last year federal employment has been cut by 92,000.

Employment numbers were revised up for September from plus 163,000 to plus 175,000. October numbers were revised down from plus 204,000 to plus 200,000. Total employment gains those months were therefore 8,000 higher than previously reported. In the last 12 months job growth has averaged 195,000 per month.

In October the number of people reporting temporary unemployment was up sharply due to the inclusion of federal workers who were furloughed in the government shutdown. In November, with the government back in business, the number decreased to 71,000.